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There is another – maybe….

Enbridge recently plopped down $20 million on a piece of land in northwest B.C. How come?

When he was younger, Max Fawcett wanted to make a mint in the markets. Now as the managing editor of Alberta Venture he gets to write about them. Close enough, right? He can be reached at mfawcett@albertaventure.com

Mar 11, 2014

by Max Fawcett

Generally speaking, a $20 million land purchase by Enbridge wouldn’t be newsworthy. But when that land is on the northwest coast of B.C., and the company refuses to comment on what it plans to do with it? Well, then it gets interesting. The 64 hectares of land in Grassy Point, one of the three areas on the B.C. coast that the provincial government has sanctioned for LNG exports, were purchased on December 19 of last year. And they just so happen to be adjacent to parcels purchased by Australia’s Woodside and CNOOC’s Nexen. As such, it stands to reason that it might represent Enbridge’s attempt to get into the LNG export game – better late than never, after all.

But because nature – and the media – abhors a vacuum, and because Enbridge spokesperson Ivan Giesbrecht refused to comment on what the company planned to do with the land, Forest Ethics spokesperson Ben West decided to get conspiratorial on the Vancouver Sun’s Gordon Hoekstra. “Who knows what their plans really are (for this recently-purchased land),” West told Hoekstra. “It’s possible they are in conversations with the federal government. Part of what could happen in this approval process (for Northern Gateway), is (Prime Minister Stephen) Harper could change what the approved plan is in any number of different ways. So, maybe this has something to do with that.” West also floated the possibility that Enbridge is trying to “trade off investment in LNG for support for Northern Gateway,” as if there wasn’t already considerable (indeed, almost certainly surplus) interest in it already. If Premier Christy Clark really wants to see more investment in LNG, all she has to is reduce the tax rates she intends to apply to the fledgling sector – and hope that global competitors don’t get their product to China and Japan before the ones looking do drill up the Montney can plunk down their billions.

Meanwhile, over on BNN, Sprott Asset Management’s Eric Nuttall came by with a few perspectives and picks for the energy sector. On a macro basis he still prefers oil to gas-weighted names, given that the recent strength of the latter is, in his opinion, a reflection of near-term trends. Oil, on the other hand, is less prone to weather-driven demand and shortages, and when its strength is combined with the weak Canadian dollar some Alberta names start to look very attractive. Indeed, when the narrowing differentials are combined with the $0.90 Loonie, Canadian producers are actually getting more for their oil than their U.S. counterparts for the first time in a while – and their shares don’t reflect that yet. “I’m really excited for 2014,” Nuttall said.

In terms of top picks, Nuttall highlighted Spartan Energy (TSXV:SPE), a popular name of late among analysts but one he thinks is still undervalued by the market. “What I love is that Spartan is run by a management team that I know very well,” he said. “They’re proven money makers, and their core expertise is in southeast Saskatchewan. That’s where all of Renegade’s assets are. There was this taint on Renegade because the stock did so poorly and people thought their assets were of poor quality. That’s not the case.” He thinks it will get some lift once the Renegade transaction finally closes, and it can grow its production by 25 per cent this year and 45 per cent in 2015.

He also liked Torc Oil and Gas (TSE:TOG), which was a top pick the last time he was on Market Call but one that he still likes despite its strong performance since then. Its shares have sold off a bit on a recent quarterly report, and he thinks that’s a buying opportunity. “I think people are totally misreading what Brett Herman is guiding for. They have one of the most sustainable dividend models in Canada, and can achieve a total return that’s a 10 per cent production growth rate and a five per cent yield spending less than one times cash flow.” The company has a potential new inventory base in the Monarch and Three Forks plays, and he thinks it will drill those up as the year progresses. He put a $13 price target on its shares (a roughly 30 per cent upside), and noted that he was being “very conservative” in so doing.